Daily FX & Market Commentary

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Daily FX Commentary: (Morning Report)

EUR/USD

The pair remains under pressure, as negative sentiment continues to drive the price lower, with today’s fresh weakness posting new low at 1.2919, just ahead of our downside target at 1.2900 zone. Subsequent bounce on oversold conditions does not see much of upside action, as long as the price holds below initial barrier at 1.3000 zone. Further extension sees regain of 1.3055/80 zone, Fib 61.8% of 1.3138/1.2919 / 22 Oct high, required to re-attract upper barriers above 1.3100. Otherwise, violation of 1.2900 handle, would risk return to 1.2800 base.

Res: 1.2982, 1.3000, 1.3013, 1.3029
Sup: 1.2919, 1.2910, 1.2900, 1.2890

GBP/USD

Strong bounce off today’s low at 1.5911, revives near-term bulls, as rally regains initial 1.6000 and the next barrier at 1.6050, 22 Oct high / 50% of 1.6178/1.5911 downleg / 4h 55 day EMA, where gains stalled, as hourly studies entered overbought territory. Clear break above 1.6050 is required to sustain recovery and avert immediate downside risk, in favor of stronger correction, with 1.6075, Fib 61.8% and 1.6100, seen as next targets. However, broader downtrend off 1.6308 would stay intact, while price holds below main bear-trendline at 1.6140 and 17 Oct lower top at 1.6178.

Res: 1.6050, 1.6075, 1.6100, 1.6110
Sup: 1.6020, 1.6000, 1.5970, 1.5950

USD/JPY

The pair remains in consolidative sideways mode, with price action entrenched within 79.70/80.00 range. Neutral hourly and 4h indicators moving out of oversold territory, see potential for stronger correction. Ideally, deeper dips should be contained at 79.50 zone, but further extension lower, sees risk of break below 79.00, Fib 38.2% of 77.42/80.00 that would sideline near-term bulls. Conversely, lift above 80.00 to signal fresh bullish extension and open 80.09 and 80.65, 50% of 84.17/77.12 downmove.

Res: 80.00, 80.09, 80.65, 81.00
Sup: 79.70, 79.65, 79.45, 79.21

USD/CHF

Today’s fresh extension of recovery rally from 0.9213, stalled at 0.9260, just under important 0.9370, 15 Oct high. Near-term bulls remain in play, as current pullback is seen as corrective, as long as significant support at 0.9300 zone, today’s/12 Oct low and 20/55 day EMA’s bullish crossover, holds dips. Upside extension through 0.9370 and 0.9387, 200 day MA, is required to shift focus towards key barriers at 0.9430/36 and confirm near-term base at 0.9212. Conversely clear break below 0.9300, would risk lower top and fresh extension lower.

Res: 0.9342, 0.9360, 0.9370, 0.9387
Sup: 0.9319, 0.9312, 0.9300, 0.9288

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Daily Market Commentary: (Evening Report)

London Market Report

Stocks rebound despite mixed economic data

Market Movers
techMARK 2,091.82 +0.40%
FTSE 100 5,804.78 +0.12%
FTSE 250 11,862.66 -0.24%

UK stocks finished in positive territory on Wednesday, albeit only just, after some decent corporate earnings offset some mixed economic data from China and the Eurozone.

Better-than-expected earnings from Facebook and Boeing pushed US stocks higher after the opening bell in New York. News that American new-home sales in September rose at their fastest rate since 2010 also gave markets a lift today. Tech stocks worldwide were making gains after German software giant SAP hiked its full-year revenue target.

"Global equities markets poured on some modest gains Wednesday after yesterday’s previous session losses as traders take to heart the brighter spots in earnings releases released today and Draghi’s attempt to charm his biggest critic, Germany," said market strategist Ishaq Siddiqi.

Meanwhile, European Central Bank (ECB) President Mario Draghi defended the Bank's bond purchase programme in front of German policymakers today. He attempted to quash concerns that its outright monetary transactions (OMTs) will lead to higher inflation.

UK stocks started with an upward bias early on after some upbeat Chinese data. HSBC's China manufacturing purchasing managers' index (PMI) for October ticked higher to 49.1 points from 47.9 in September, the best reading for three months. "October's flash PMI reading continues to recover for the second month, thanks in part to a gradual improvement in the new orders index, which picked up to a six-month high," said Qu Hongbin, chief economist for HSBC Holdings PLC's China arm.

However, trading was volatile this morning after some European economic figures failed to live up to expectations. Markit's Eurozone composite PMI, which measures the combined output of the manufacturing and service sectors, fell for a third consecutive month to 45.8 in October, from 46.1 the month before. This was the worst reading in 40 months. The consensus forecast was for an improvement to 46.5.

Meanwhile, the IFO Business Climate Index, a measure of corporate confidence in Germany, declined unexpectedly in October, the sixth consecutive monthly fall. The index fell to 100.0 this month, from 101.4 in September, under consensus expectations of a rise to 101.6.

Europe Market Report 

European Markets Managed A Slight Rebound From Recent Weakness

The European markets finished to the upside for the first time this week on Wednesday, rebounding slightly from recent weakness. After yesterday's sharp sell-off, some of today's recovery can be attributed to bargain shopping. Manufacturing data from China had a positive effect on investor sentiment, but weak manufacturing data in Europe and a further decline in the German Ifo sentiment made investors more cautious. Corporate earnings results showed signs of improvement Wednesday, following the gloominess of the last 2 days.

Business conditions across Chinese manufacturing sector showed early signs of recovery in October with the rate of contraction in both output and new orders decelerating, preliminary results of a survey by Markit Economics revealed Tuesday.

The HSBC purchasing managers' index for the manufacturing sector climbed to a three-month high of 49.1 in October from 47.9 in September. However, the reading below 50 suggested a contraction in activity, albeit at a more moderate pace.

European Central Bank President Mario Draghi has defended a plan to buy government bonds that has drawn strong opposition from Germany.

Making a rare appearance in a national parliament, the ECB Chief told German lawmakers at the Bundestag on Wednesday that the bond purchases known as the Outright Monetary Transactions (OMTs) will not lead to inflation.

"We have designed our operations so that their effect on monetary conditions will be neutral. For every euro we inject, we will withdraw a euro," Draghi said.

Bank of England Governor Mervyn King said the central bank is ready to add more stimulus if the recent positive signs in the economy fade.

The recovery and rebalancing of the UK economy are proceeding at a slow and uncertain pace and at this stage, it is difficult to know whether the recent positive signs would persist, King said in a speech to the South Wales Chamber of Commerce on Tuesday.

Italy requires two or three years to see an improvement in productivity as a result of structural reforms introduced by the government, Klaus Regling, head of European Stability Mechanism told daily Il Sole 24 Ore on Wednesday. He said Italy is on the right track.

The Euro Stoxx 50 index of Eurozone bluechip stocks increased by 0.60 percent and the Stoxx Europe 50 index, which includes some major U.K. companies, added 0.55 percent.

The DAX of Germany climbed by 0.27 percent and the CAC 40 of France advanced by 0.59 p

Confidence among Eurozone consumers improved slightly in October, a survey published by European Commission showed Tuesday. The flash consumer confidence indicator rose to -25.6 in October from -25.9 in September. Economists expected the reading to remain unchanged from the September level.

Eurozone private sector output in October dropped at the sharpest rate since June 2009, in a worrying sign that the downturn in the single-currency bloc will likely deepen in the final quarter of the year.

The composite output index, which measures the combined output of the manufacturing and service sectors, fell to 45.8 in October from 46.1 in September, survey data from Markit Economics revealed Wednesday. Economists had expected a higher score of 46.5.

US Market Report

Stocks Giving Back Ground After Seeing Initial Strength After failing to sustain an initial upward move, stocks have given back some ground over the course of the trading day on Wednesday. The major averages have pulled back well off their highs for the session, with the Nasdaq and the S&P 500 sliding into negative territory. Currently, the major averages are turning in a mixed performance, with the Dow holding on to a slim gain. While the Dow is up 9.61 points or 0.1 percent at 13,112.14, the Nasdaq is down 6.85 points or 0.2 percent at 2,983.61 and the S&P 500 is down 0.73 points or 0.1 percent at 1,412.38. Bargain hunting helped to drive stocks higher at the start of trading, although buying interest waned not long after the open amid lingering concerns about the outlook for the market against the backdrop of a generally disappointing earnings season. Stocks have subsequently moved back to the downside, with many adding to the steep losses posted in the previous session. Traders have largely shrugged off a report from the Commerce Department showing a bigger than expected increase in new home sales, which rose to a two-year high. The report said new home sales rose 5.7 percent to an annual rate of 389,000 in September from the revised August rate of 368,000. Economists had expected new home sales to increase by about 3.2 percent to an annual rate of 385,000 from the 373,000 originally reported for the previous month. With the bigger than expected monthly increase, new home sales reached their highest annual rate since April of 2010.